Final EPA Rule Could Cost Half Billion More Than Expected

Earlier this month, the EPA released its latest rules for cutting methane emissions from the oil and natural gas industry, setting new standards for methane leaks at production lines for pumping and drilling at new or modified wells. The primary component of natural gas, methane is considered by EPA to have 25 times more global warming potential than carbon dioxide.

“The common-sense steps we are rolling out today will help combat climate change and reduce air pollution that will immediately help improve public health,” says EPA Administrator Gina McCarthy.

EPA’s first attempt at a methane rule came last August via a proposal by the president. This latest, finalized rule is even tougher, aiming to reduce 540,000 short tons of methane from the atmosphere by 2025. That’s a 35% increase from last year’s proposal of 400,000 short tons.

The agency also removed proposed exceptions for low-producing wells and will require monitoring for leaks and demand quicker repair when those leaks are found. Estimates say the updated rule could cost the oil and natural gas industry as much as $530 million more than anticipated. The rule will impact around 22,000 owners and operators.

There can be no doubt that raising costs for drillers will hurt the American shale industry that has made America a leader in oil and gas production worldwide and driven down energy prices across the U.S. For that reason, the energy industry is contemplating legal action against the EPA over the rule. The American Petroleum Institute said in a statement that the rule “put the shale revolution at risk” by increasing costs and reducing incentives.

In addition to the current finalized rule, EPA also plans to begin work on a rule to cut methane leaks at existing wells. That rule will require more research and time and likely won’t be written until a new president assumes office next year.

The natural gas industry warns that these additional regulations will also hurt production. The rules also might be unnecessary, since natural gas producers already have a strong motivation to keep methane from escaping their wells. According to the American Petroleum Institute, for example, the industry has already reduced methane emissions by 11 percent from 2005.

“If these ‘commonsense standards’ for the EPA’s methane rule are anything like the ‘commonsense standards’ used for their power plant rules, we’re in for another long battle of correcting the agency’s mistakes,” said Myron Ebell, the director of Competitive Enterprise Institute’s Center for Energy and Environment.

Controlling methane emissions is important. However, EPA should focus on supporting the current efforts of the oil and natural gas industry to control emissions, as opposed to stifling innovation with more heavy-handed regulation. Doing so will help ensure the benefits of the U.S. energy boom and protect American jobs in the process.